If you have a child with a disability, particularly one receiving ODSP, you may wish to consider leaving funds to them in your will through what is known as a Henson Trust.
This is a special kind of trust that is set up so that the disabled beneficiary does not have access to their funds, and so the funds are exempt from means tests that these government programs have.
Yet, the funds can be invested and made use of for the benefit of the disabled beneficiary. The income that the beneficiary receives is purely discretionary. This means that it is completely up to the trustee (the person running the trust) to decide how much and when payments are made to the beneficiary.
The reason behind this is so that the beneficiary has no right to the income. If the beneficiary were required to receive the income, this would affect entitlements under the ODSP. In other words, if the beneficiary can force the trustee to pay the income to him, then he has a right to the income, and this income is taken into account in determining ODSP eligibility.
Some people are nervous about the purely discretionary nature of the Henson trust, and may wish to direct how the trustee is to handle the funds. However, if you do that, then you risk affecting the beneficiary’s right to ODSP. One way around this is to create a “letter of wishes”. This is a separate document from your will, which is not legally binding, but sets out your wishes as to how the funds in the Henson trust are to be used The letter of wishes does not get mentioned in your will. While not legally binding, if you choose your trustee correctly, your trustee is likely to follow your wishes. There is no particular legal format for this as it is not a public document – you can prepare this on your own, and keep it with your will.
As for the trustee (the person who looks after the funds for the disabled beneficiary), you want to choose someone you not only trust to manage the finances well, but also who is sensitive to the disabled beneficiary’s special needs. Typically a sibling or close family member is a good choice, but if that is not possible, then a corporate trustee is an option.
Finally, you need to consider what happens to any funds left over when the disable beneficiary passes away. These can be left to siblings of the disabled beneficiary, other family members, or to charity.
Henson trusts are not only useful for disabled beneficiaries, but also for what in law is known as “improvident” beneficiaries. That is, people who may not be the best at handling money, or have gambling problems, or simply need protection from claims by spouses and creditors.
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